Domestic retailers overwhelmed by foreign competition

photo source : vneconomy.vn

While foreign retailers are increasing their investment and expanding their operations in Vietnam, more and more domestic retailers are forced to cease operation.

Sapomart, the new brand identity of Hiway Vietnam Joint Stock Company (Hiway) co-founded by Son Ha International Corporation and other foreign shareholders, has announced to suspend its operation after one year of changing its brand identity. In 2015, its revenue fell to one third compared to its initial plans.

In early 2015, the company decided to rebrand its Hiway Supercentre to Sapomart, and targeted to open ten supermarkets in Hanoi in 2015 and to rank amongst Vietnam’s top five largest retailers by 2020.

However, the company currently only has three supermarkets, namely Sapomart Ha Dong, Sapomart Giang Vo, and Sapomart Tay Ho, all of which ceased operation after a single year of operation.

Sapomart is not the only retailer having difficulties. Hanoi Trade Corporation's Hapro brand is also exhausted from the race in the retail sector.

Hapro currently tries to maintain the operation of two shopping centres in Hanoi, namely Hapro Shopping Centre in Long Bien district and HaproFood in Tay Ho district. Aside from these, Hapro has 40 supermarkets and convenient stores, as well as 44 HaproFood shops in Hanoi and some cities and provinces in the northern region.

“Domestic retailers can not compete with foreign retailers due to numerous weaknesses in capital and management capacity. Almost all retailers operate at a loss in the first years of operation, thus, if they do not have enough capital to maintain operation at a loss, they must close down. Meanwhile, foreign enterprises have massive capital to operate at a loss for many years even, and are capable of making massive expenditures on marketing and promotion programmes to attract consumers,” said Vu Vinh Phu, chairman of the Hanoi Supermarket Association.

“A distinct lack of knowledge in the domestic retail sector is another weakness of enterprises’ leaders, more than 80 per cent of whom are not methodically trained about retail marketing strategy, while foreign enterprises always have clear marketing strategies and offer professional services. They create sustainable links with manufacturers to control price and product quality,” he added.